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EEA outlines plans to restructure life settlement fund

EEA fund management has sent a letter to investors highlighting three potential restructuring plans for its life settlement fund.

EEA was forced to suspend dealing in its life settlement fund on November 28, 2011, after receiving unprecedented levels of redemptions from advisers and institutional investors. The move came after the FSA labelled life settlement funds as high risk, toxic products and said it aimed to ban traded life policy investments from being marketed to retail investors.

EEA says that since the suspension the fund’s board and the fund manager have been considering possible ways of restructuring the fund once the FSA’s consultation exercise has concluded and the regulator has published its final guidance. EEA says it has three viable options but says these may be impacted by further FSA guidance.

The options include allowing investors to continue holding existing shares in cells in the continuing fund, with some additional dealing restrictions, such as a lock-in period.

The second option is to allow investors to exchange existing shares in cells in the fund for shares in a run-off vehicle, where distributions will be made to shareholders as policies mature and proceeds are received. The final option allows investors who need immediate access to cash to be given the ability to sell their shares to institutional investors.

EEA says it hopes to publish a further update when the FSA offers its final guidance, which EEA hopes will come in April. The group says it hopes to confirm arrangements for the distribution classes at that point.

The Guernsey-domiciled EEA life settlements fund launched in November 2005 and was £600m in November 2011.

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Comments

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  1. Why on earth are EEA thinking of introducing a lock in period? Their marketing always implied that liquidity is not a problem, if cash got tight they suggested it would be easy to sell policies. Clearly thats not the case.

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